Snapple 2010 Annual Report Download - page 103
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DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s Canadian deferred tax assets included a separation related balance of $131 million that was offset by a
liability due to Cadbury of $119 million driven by the Tax Indemnity Agreement. Anticipated legislation in Canada could result
in a future partial write down of tax assets which would be offset to some extent by a partial write down of the liability due to
Cadbury.
As of December 31, 2010, the Company had $18 million in tax effected credit carryforwards and net operating loss
carryforwards. Net operating loss and credit carryforwards will expire in periods beyond the next five years.
The Company had a deferred tax valuation allowance of $16 million and $18 million as of December 31, 2010 and 2009,
respectively. The valuation allowance relates to a foreign operation and was established as part of the separation transaction.
As of December 31, 2010 and 2009, undistributed earnings considered to be permanently reinvested in non-U.S. subsidiaries
totaled approximately $203 million and $115 million, respectively. Deferred income taxes have not been provided on this income
as the Company believes these earnings to be permanently reinvested. It is not practicable to estimate the amount of additional
tax that might be payable on these undistributed foreign earnings.
The Company files income tax returns for U.S. federal purposes and in various state jurisdictions. The Company also files
income tax returns in various foreign jurisdictions, principally Canada and Mexico. The U.S. and most state income tax returns
for years prior to 2006 are considered closed to examination by applicable tax authorities. Federal income tax returns for 2006,
2007 and 2008 are currently under examination by the Internal Revenue Service. Canadian income tax returns are open for
audit for tax years 2008 and forward and Mexican income tax returns are open for tax years 2000 and forward.
Kraft acquired Cadbury on February 2, 2010 and, therefore, assumes responsibility for Cadbury's indemnity obligations
under the terms of the Tax Indemnity Agreement.
Under the Tax Indemnity Agreement, Kraft will indemnify DPS for net unrecognized tax benefits and other tax related
items of $419 million. This balance increased by $17 million during 2010 and was offset by indemnity income recorded as a
component of other income in the Consolidated Statements of Operations. In addition, pursuant to the terms of the Tax
Indemnity Agreement, if DPS breaches certain covenants or other obligations or DPS is involved in certain change-in-control
transactions, Kraft may not be required to indemnify the Company.
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